Supporters of Maryam Rajavi, President of the National Council of Resistance of Iran, demonstrate against the Iranian President Hassan Rouhani's visit in Paris, Wednesday, Jan. 27, 2016. (AP Photo/Christophe Ena)

One day after the Trudeau government announced it will begin lifting sanctions on Iran, there are still many unanswered questions about the domino effects of such a move — particularly about how it will factor into Canada’s evolving relationship with Israel and whether Iran’s listing as a state sponsor of terrorism will affect the kinds of activities businesses can do there.

Israel’s ambassador to Canada, Rafael Barak, told iPolitics the decision to re-engage with Iran is an internal matter — but added Israel is “deeply concerned” by the move.

“Iran remains one of the most dangerous countries in the world,” said Barak. “Iran is also an active actor which aggressively operates to destabilize countries in the region like Lebanon, Syria, Yemen and Iraq. On top of this, the rhetoric of the Iranian regime, threatening the mere existence of Israel, its denial of the Holocaust — which ironically will be commemorated worldwide (today) — are type of behaviours that due to our historic experience, we take very seriously.”

Iran’s transition from Middle Eastern pariah to potential Western partner has sparked a debate about the degree to which the government should take advantage of political opportunities to reassess its relations in the region. Prime Minister Justin Trudeau ran on a platform that promised to shift Canada into a less ideologically-combative foreign policy position — but since the election, he hasn’t offered a lot of specifics about how and when Canada plans to move forward.

“We will take it step by step and that certainly won’t be the first step,” Foreign Affairs Minister Stéphane Dion said in a scrum with reporters after question period on Tuesday. “Relations with Iran should only be reestablished when they make sense from the perspective of Canadian interests and values, and they have to be done in a responsible and prudent manner.”

The political reactions to renewed relations with Iran will be a test of whether Canadian leaders, media and voters are willing to move past the foreign policies of the Harper era, said Gil Troy, a history professor at McGill University and a Shalom Hartman Engaging Israel Research Fellow in Jerusalem.

When it came into power in 2006, the former Conservative government took a markedly more aggressive approach to expressing its support for a variety of diaspora communities, including Canadian Jews, and shifted Canada towards a more combative approach in its foreign policy, said Troy.

After Dion announced Tuesday that Canada would begin lifting some sanctions on the country, foreign affairs critic Tony Clement pointed to Iran’s attitude towards Israel as one of the factors that ought to be considered in how Canada engages with it.

“Let’s look at the facts. The facts are that Iran is a state sponsor of terror,” he said. “It funds and supports terrorist activity in the region and around the world, killing innocent civilians, including Canadians. It continues as state policy to deny the very existence of the State of Israel. At the very time that it was doing the nuclear deal with the United States, it was in violation of UN resolutions on ballistic missiles, which is not a trifle. So to say that Iran has changed its policies to the extent that we can lift sanctions, I think, is a big mistake.”

The Conservatives have used Iran’s status as a state sponsor of terrorism to criticize the Trudeau government’s willingness to re-engage with Iran in recent months.

Thomas Juneau, a former Department of National Defence Middle East analyst and now a professor at the University of Ottawa, cautioned last week that the Conservatives had “booby-trapped” efforts to re-engage with Iran by listing it as a state sponsor of terrorism with their 2012 Justice for Victims of Terrorism Act. He told The Canadian Press he believed the new government was struggling to figure out how to negotiate its approach to renewing relations, given the optics of engaging with a listed country.

That legislation allows victims of terrorism to sue states they believe can be linked to support for specific terrorist acts; a test case involving Iran and its alleged support for Hezbollah militants is in a Toronto court this week.

But being listed as a state sponsor of terrorism under the act isn’t the same as being listed on the Criminal Code’s Listed Terrorist Entities, and only the Islamic Revolutionary Guard Corps’ Quds Force — Iran’s clandestine force responsible for military activities outside of the country — is currently listed there, not the Iranian government itself.

“Nothing has ever stopped us in terms of someone saying they are a state sponsor of terrorism,” said John Boscariol, a partner at the Toronto law firm McCarthy Tetrault with clients who do business with Iran. “That listing doesn’t prevent a Canadian company from doing business with Iran.”

Global Affairs Canada, however, has not yet responded to a request for clarification on which activities would be prohibited under that listing.

Alongside the argument that engagement is a better tool than isolation for promoting change in Iran, those calling for the sanctions on Iran to be lifted also have pointed to the potential economic opportunities in Iran, urging the government to give Canadian businesses the same access that competitors in the United States, Europe, Japan and Australia now have.

With 80 million people, most of whom are highly educated and eager to interact with the world, Iran has been billed as one of the last untapped markets in the world.

The Liberals haven’t announced yet which specific sanctions they will lift; Canada’s current sanctions prohibit the import and export of most products to Iran, along with a ban on financial services and the provision of military equipment.

Boscariol said he hopes the government will take an approach similar to how Canada dropped sanctions on Myanmar in 2012.

In that case, all blanket bans on imports and exports were lifted but the ban on providing military equipment remained in place.

“That’s the first thing, and it has to move now in days, not weeks or months, to make clear what it’s changing under the sanctions,” Boscariol said.

But while Iranian President Hassan Rouhani has been making the rounds visiting European leaders and inking business deals, it’s probably best not to expect a visit to Canada in the near future.

“I’d be very surprised though if we saw Rouhani here within the next few weeks or even months. I think the Liberals are still treading carefully here. Obviously there’s still concern with Iran’s position vis-a-vis Israel and they recognize that. There’s concern with their position in supporting terrorism,” Boscariol said, noting it will be important to watch how Iran evolves as the effects of sanctions lifting becomes clearer.

“I think there’s an internal battle going on in Iran between hardliners and reformers, and it’s in our interest to keep economic ties in place, keep diplomatic ties in place, to encourage the reformers.”